In which circumstance must a KYC analyst obtain source of wealth information on a client subject to CDD?
Answer(s): D
FATF requires obtaining and verifying source of wealth information in higher-risk situations, such as when there is increased involvement with high-risk jurisdictions or Politically Exposed Persons (PEPs), as part of enhanced due diligence.
Customers opening accounts online identify their occupation from a drop-down list. A KYC analyst notices a high volume of applicants selecting "Accountant" because itis at the top of the list. The institution's KYC policy does not require evidence to verify occupation.Which is the most appropriate action for the KYC analyst to take?
A sudden pattern in occupation selection can indicate inaccurate self-reporting or potential misuse of the onboarding process. Even if policy does not require occupation verification, such anomalies should be escalated to the KYC manager for review and potential policy or process adjustments.
Which situation would most likely increase the inherent risk of a corporate customer?
Expanding business operations beyond the home country increases inherent risk due to cross-border transactions, exposure to multiple jurisdictions, and potential dealings with regions of higher money laundering or terrorism financing risk.
A compliance officer in an international bank is reviewing new customer onboarding files. The relationship manager provides a whole set of customer documents, in addition to information from open source research. What information should be used by the compliance officer as secondary documentation to verify the primary documentation?
Answer(s): A
Secondary documentation for verification purposes should be recent, reliable, and issued by a trusted source. Utility bills, phone bills, or bank statements issued within the last three months are commonly accepted to confirm address and identity details provided in primary documentation.
Sanctions screening is important before onboarding a customer, or when using the services of a financial institution, because it:
Answer(s): C
Sanctions screening is conducted to detect whether a customer or related party is on a sanctions list or linked to a sanctioned location, ensuring compliance with legal and regulatory requirements before establishing or continuing a business relationship.
Which is the best technique to effectively document a customer profile?
Effective customer profile documentation should be clear, precise, and free from subjective language. Providing context and avoiding ambiguity ensures the information is reliable, verifiable, and usable for risk assessment and compliance purposes.
A KYC analyst is running an adverse media search on a prospective client's directors and learns that one of the directors has been accused of receiving bribery payments. Which step should the KYC analyst take next?
Answer(s): B
Allegations of bribery involving a director are a significant red flag for potential financial crime risk. The KYC analyst should escalate the finding to the compliance team for assessment and guidance before making any decision on the business relationship.
A bank's business team has developed a new strategy, which includes the introduction of prepaid cards as a new high-risk product offering. The compliance team has proposed to impose a monetary limit on each prepaid card and limit the offering to the existing customers of the bank only. Which best describes the risk impact of the controls proposed by the compliance team?
Inherent risk is the natural risk before controls are applied. The compliance team's measures (monetary limits and restricting to existing customers) reduce the exposure to misuse, thereby lowering the residual risk - the risk that remains after controls are implemented.
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